IA COmmentary 2

IA COmmentary 2 - IB Economics Internal Assesment 2nd...

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IB Economics Internal Assesment – 2 nd Commentray Gaith Kalai Banks Lower Interest Rates in Autumn During certain times of economic change, banks utilize their power over their loans and change their interest rates in order to increase or decrease aggregate demand. In times where an economy is about to enter recession or if it already is suffering negative growth rates, then banks or the government may decrease interest rates to make it easier for people to borrow money in attempt to increase aggregate demand. It is hoped that the increase in aggregate demand will increase as consumption expenditures, investment expenditures and net exports tend to rise. Loosening interest rates is a well-known form of monetary policy 1 , where it is aimed to stimulate economic growth by lowering short term interest rates, making money less expensive and more readily available to the public. A move such as this is directed to have numerous effects on several components of aggregate demand. Firstly, consumption expenditures will tend to increase as households are borrowing to finance the purchases of durable goods such as cars and real estate. In the case of mortgage loans 2 , reduced interest rates mean lower monthly payments on variable rate loans so households will have more disposable income
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IA COmmentary 2 - IB Economics Internal Assesment 2nd...

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